India aviation could lose over $3 billion in April-June quarter

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NEW DELHI, NNA- India's aviation sector is expected to lose as much as $3.6 billion as it flies into a perfect storm in the first fiscal quarter.

Battered by travel restrictions and the resultant economic downturn caused by the Covid-19 pandemic, the industry could incur disastrous losses of between $3.3 billion and $3.6 billion, according to April-June estimates by aviation consultancy firm CAPA India.

Apart from the Indian government's suspension of all scheduled domestic and international flights till mid-April, forward bookings for domestic travel from May to July have nose-dived 80 percent year-on-year, the firm noted in its report on April 6.

It also added that the prohibition on flights might be extended in view of the grim outlook. The first quarter will be "almost written-off,” said CAPA India in its report.

“The trajectory of the resumption of operations will be driven by the demand for travel, which will have clearly been damaged by the severe human and economic costs that Covid-19 is inflicting,” it said.

The firm believes that travel restrictions are unlikely to be lifted totally overnight. Instead, air travel will probably return in a staggered manner, particularly for international flights.

Its report said any regulatory provisions related to social distancing at an airport and onboard a plane, increased turnaround times to enable thorough cabin cleansing, limitations on inflight service might have an adverse impact on an airline's operational costs and passenger volume.

This could force some carriers to operate fewer planes to save costs, until there is better clarity on how the demand for travel is recovering.

In its report in March, Acuité Ratings & Research Ltd. estimated that the “significant negative growth” in monthly domestic airline traffic could be as drastic as 50 percent, at least up to June.

Last week, SpiceJet, a leading domestic budget carrier, announced that its staff across top to mid-rung levels took pay cuts ranging from 10 to 30 percent in March.

“The Covid-19 pandemic and the subsequent lockdown have forced us to take some tough measures to ensure that no one at SpiceJet is retrenched,” Ajay Singh, chairman and managing director, SpiceJet, said in a statement on March 31.

“What we are facing is a global phenomenon and no airline in the world is immune to the impact,” he added.

Meanwhile, India’s Crisil Ltd., a unit of S&P Global Inc., has slashed the country’s growth forecast for fiscal 2020 starting this month from 5.2 percent to 3.5 percent in its revision after the pandemic ravaged air travel and economies across the world.